Treasury Management Services

Retirement Services

Impact Investing at First Western Trust

April 22, 2016

For years, popular opinion has held that in order to invest in socially responsible companies that focus on environmental, social, and governance (ESG) factors, an investor had to accept below market returns. But, with proper investment advice, that is simply not the case.

In a recent discussion with our Chief Investment Officer, Debbie Silversmith, we dig deeper into the decision to add socially responsible investment (SRI) funds to First Western Trust’s investment platform.

Question: What was the impetus behind adding SRI funds to the First Western Trust platform?

Debbie Silversmith: The starting point came from our Boulder office. Our firm has always been driven by a focus on our clients’ needs and goals. What we saw over the past few years was a real appetite from our Boulder client base to add some socially responsible, ESG-focused funds to our investment line-up so that these investments could be part of their portfolios. This pushed our investment research team to perform due diligence within the field and identify ways that we could meet the interests of our clients while adhering to our investment philosophy.

Q: How do SRI funds fit into the overall investment philosophy of First Western Trust?

DS: Our philosophy is focused on investing on high quality companies at reasonable valuations to produce superior long-term, risk-adjusted returns. When we look at SRI funds, we are looking for companies that are of the highest quality.

Companies who focus on ESG factors often produce great profits for their stakeholders while doing great work for their community, and they tend to have a long-term focus in mind. So in that aspect, these funds fit very well in the philosophy of First Western. It is simply a matter of doing the due diligence to understand which companies make up the SRI funds and ensure that they are of a high caliber.

Q: It seems like a lot of firms still think that impact investing will come with below market returns. What is First Western Trust’s take on this?

DS: This was a pretty common perception, and to some extent, it still is for a lot of investment managers. However, we do not believe that our clients need to sacrifice economic returns to do “good” with their investments. You just need to select the right investment managers. It’s the same thing that you see with other funds. If you want to see strong performance out of your investments, you need to perform careful due diligence to select strong investment managers and strong funds.

Q: Does your due diligence process differ significantly between SRI funds and other funds?

DS: We essentially follow the same process. We are diligent in our initial screenings to understand the performance and holdings of the SRI funds. We assess their process, risk, and the experience of the fund managers as we would our other funds. We provide ongoing due diligence to ensure that these funds are contributing to our clients’ overall investment goals.

However, in some ways, we are more diligent with SRI funds. We have researched a number of opportunities for our clients in this arena in both publicly traded securities and private investments, and we make a concerted effort to understand these companies and the way they impact their communities. We want these funds to provide a return, but our clients want the companies within them to do “good,” so we do perform due diligence to ensure that they are living up to the ESG factors that they have outlined.

Q: In First Western’s current line-up of ESG-focused funds, are all of the funds actively managed, passively managed, or both?

DS: We treat SRI funds in much the same way as we treat our other funds, so we provide both active and passive options to our clients. Our belief at First Western Trust is that there are opportunities for both actively and passively managed funds within a portfolio. Some investment environments are better either for active or passive management approaches, but it is impossible to predict with certainty when the tide will shift. With that in mind, we see no reason for an investor to make an either-or decision, and instead, they should be able to take advantage of the benefits of both. We ensure that our SRI funds mirror that belief as well and provide both active and passive options.

Q: Going forward, how do you see First Western Trust interacting in this space?

DS: Our goal is to always listen to and respond to the needs and interests of our clients, so we will continue to look for funds and other avenues to meet their goals. In impact investing, we’ll continue to assess the funds we currently have on our platform and look at other opportunities domestically and internationally, within publicly traded securities and private investments, to provide options to our clients so that they can make impact investing a part of their overall portfolio.

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